Govt must squeeze more from less - IMF

Brian Benza
Staff Writer | Wednesday June 16, 2010 00:00

 

In a statement released on Monday, the IMF says as the forecast for Government revenues becomes more constrained while social obligations remain high, Government will need   to improve management of public finances and re-prioritise spending patterns.

'The outlook for government revenues is set to become more constrained, reflecting a trend of decline in mineral revenues and customs and excise receipts,' says the IMF statement. 'As the fiscal environment becomes more challenging, management of public finances will need to improve. With less revenues available than in the past but social challenges remaining significant, the government will need to do more with less.'

The statement follows a consultative visit by an IMF mission to Gaborone early this month.

Following the global recession, Botswana's national revenues plunged by 50 percent in 2009 while expenditure levels remained high, forcing the government to run budget deficits over the past two fiscal years.

While the IMF has labelled the government's plans to strike a balanced budget by 2012 'ambitious', the Bretton Woods institution says reforms to budget formulation and management, including greater emphasis on prioritising spending and delivering results, have become critical. 'With recovery now underway, fiscal policy is being appropriately redirected away from short-term demand management towards medium-term considerations,' says the report prepared by Robert Burgess, who is the IMF Mission Chief to Botswana.

'In this context, more efficient and effective budget management is also one of the best ways in which the government can contribute to the diversification of the economy and the development of a vibrant private sector.'

Last month, the IMF also released a report in which it called on the government to revisit its budget formulation, saying it was concerned about Botswana's non-mining/recurrent expenditure levels.

The report encouraged authorities to come up with a new fiscal rule to ensure longer-term fiscal sustainability through the separation of the development budget deficit from that of the recurrent budget.

Such a rule would provide a clearer picture of the underlying fiscal stance as a better indicator of longer-term fiscal sustainability.

Botswana is currently recovering from its worst recession in more than 40 years. The economy contracted by 6 percent last year as demand for diamonds collapsed in the wake of the global financial crisis.

 However, despite this setback, the government is still going ahead with its economic master plan, the P245-billion six-year National Development Plan 10.

The IMF mission also noted that inflation may increase temporarily as increases in VAT, electricity tariffs, and other fees and charges feed through to prices before falling within the Bank of Botswana's 3-6 percent objective during the course of 2011.

While in Botswana, the mission met with the Minister of Finance and Development Planning, Kenneth Matambo; Bank of Botswana Governor, Linah  Mohohlo; senior government officials, development partners, the private sector, and representatives of trade unions and civil society.